Snap announces first quarter 2019 financial results

Financial Highlights

• Operating cash flow improved by $166 million to $(66) million in Q1 2019, compared to the prior year.
• Free Cash Flow improved by $190 million to $(78) million in Q1 2019, compared to the prior year.
• Common shares outstanding plus shares underlying stock-based awards totaled 1,544 million at March 31, 2019, compared with 1,457 million one year ago.
• Revenue increased 39% to $320 million in Q1 2019, compared to the prior year.
• Operating loss improved $76 million to $(316) million in Q1 2019, compared to the prior year.
• Net loss improved $75 million to $(310) million in Q1 2019, compared to the prior year.
• Adjusted EBITDA loss improved $94 million to $(123) million in Q1 2019, compared to the prior year.

“In the first quarter we delivered strong results across our business with growth in daily active users and revenue,” said Evan Spiegel, CEO. “Our new Android application is available to everyone, with promising early results. This month we announced several new products that we believe will drive further engagement and monetization. As we look towards the future, we see many opportunities to increase our investments, and will continue to manage our business for long-term growth.”

Q1 2019 Summary & Key Highlights

We started the year increasing Daily Active Users and enhancing engagement across key metrics:

• DAUs were 190 million in Q1 2019, compared to 186 million in Q4 2018 and 191 million in Q1 2018.
• As of March, Snapchat reaches 90% of all 13-24 year-olds and 75% of all 13-34 year-olds in the U.S.

We fully rolled out the new build of our Android application:

• As of the end of Q1, our new Android application is available to everyone.
• The new app is 25% smaller, opens 20% faster on average, and is modularized for more efficient ongoing innovation.
• On lower-performing devices, this resulted in a 6% increase in the number of users sending Snaps within the first week of upgrading to the new Android build.

On April 4th, we hosted the first ever Snap Partner Summit to celebrate our partners and to come together in person to share some of the latest innovations we brought to our platform. These include:

• Games – We unveiled Snap Games – an all-new live, multi-player gaming experience featuring our original game Bitmoji Party and select third-party games.
• Augmented Reality – We introduced a number of augmented reality (AR) innovations, including Landmarkers, AR Bar, and Scan.
• Snap Kit – We added new features to Snap Kit, enabling our app partners to utilize the best features in Snapchat, including App Stories, Creative Kit Web, and Snap Audience Network.
• Discover – We announced a new slate of ten Snap Original Shows, our premium, mobile shows created exclusively for Snapchat’s audience, which will begin airing in May 2019, and renewed three of our most popular Snap Original Shows, including “The Dead Girls Detective Agency,” “Endless Summer,” and “Deep Creek.”

We’ve enhanced Discover’s high quality, made-for-mobile video offering across the Snapchat platform:

• In Q1 2019, nearly half of our daily Discover viewers watched Discover every day of the week.
• We now offer more than 450 premium content channels worldwide.
• In the past six months, we’ve more than doubled the number of localized media partners outside of the U.S.
• In Q1 2019 alone, we launched over 50 new Shows and Publisher Stories in international markets.
• In March, our partners increased their total mobile monthly audience in the U.S. by an average of more than 30% just by publishing to Discover, as measured by ComScore.

We have made major strides in building our platform capabilities to drive improved outcomes for advertisers:

• We made several updates to our self-serve tool, Ads Manager, including enhancing advanced features such as target cost bidding, new bulk uploading capabilities, bulk editing and cloning, and the expansion of location categories to the UK, Canada, and France.
• We continue to invest in brand-focused buying tools; our Reach & Frequency product now allows for one-day buys (the previous minimum was three) and has been expanded to the UK, Canada, and France.
• Toyota ran a sophisticated campaign across our various video and AR products to promote the Corolla Hatchback among Millennials. Snapchatters engaged with the ads, watching more than 90% of their Commercials on average, and playing with their Lenses for more than 10 seconds each on average.

Financial Guidance

The following forward-looking statements reflect our expectations for the second quarter of 2019 as of April 23, 2019, and are subject to substantial uncertainty. This guidance assumes, among other things, that no business acquisitions, investments, restructurings, or legal settlements are concluded in the quarter. Our results are based on assumptions that we believe to be reasonable as of this date, but may be materially affected by many factors, as discussed below in “Forward-Looking Statements.”

Q2 2019 Outlook

• Revenue is expected to be between $335 million and $360 million, or grow between 28% and 37% compared to Q2 2018.
• Adjusted EBITDA is expected to be between $(150) million and $(125) million, compared to $(169) million in Q2 2018.

Conference Call Information

Snap Inc. will host a conference call to discuss the results at 2:00 p.m. Pacific / 5:00 p.m. Eastern today. The live audio webcast along with supplemental information will be accessible at investor.snap.com. A recording of the webcast will also be available following the conference call.

Snap Inc. uses the investor.snap.com and snap.com/news websites as means of disclosing material non-public information and for complying with its disclosure obligation under Regulation FD.

Definitions

Free Cash Flow is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment.

Common shares outstanding plus shares underlying stock-based awards includes common shares outstanding, restricted stock units, restricted stock awards, and outstanding stock options.

Adjusted EBITDA is defined as net income (loss), excluding interest income; interest expense; other income (expense) net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time.

A Daily Active User (DAU) is defined as a registered Snapchat user who opens the Snapchat application at least once during a defined 24-hour period. We calculate average DAUs for a particular quarter by adding the number of DAUs on each day of that quarter and dividing that sum by the number of days in that quarter.

Average revenue per user (ARPU) is defined as quarterly revenue divided by the average DAUs.

A Monthly Active User (MAU) is defined as a registered Snapchat user who opens the Snapchat application at least once during the 30-day period ending on the calendar month-end. We calculate average Monthly Active Users for a particular quarter by calculating the average of the MAUs as of each calendar month-end in that quarter.

Addressable reach is defined as the approximate number of Snapchat users that an ad could reach over a 28-day period in a given locality. When we calculate the percentage of a demographic group that can be reached, we do so by dividing addressable reach by relevant census figures. Addressable reach and age data are subject to limitations. For more information, see Snap’s SEC filings and businesshelp.snapchat.com.

Note: For adjustments and additional information regarding the non-GAAP financial measures and other items discussed, please see “Non-GAAP Financial Measures,” “Reconciliation of GAAP to Non-GAAP Financial Measures,” and “Supplemental Financial Information and Business Metrics.”

About Snap Inc.

Snap Inc. is a camera company. We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate. We contribute to human progress by empowering people to express themselves, live in the moment, learn about the world, and have fun together. For more information, visit snap.com.